Texas A&M Researchers Examine Effectiveness Of State’s Franchise Tax

Newswise — Ten years ago, the Texas Legislature expanded the state’s franchise tax in an attempt to contribute more state funding to K-12 public education while simultaneously offering property tax relief. But researchers at Texas A&M University examined the plan’s effectiveness and found the tax has failed to generate the predicted revenues every year since its expansion, in part because the tax allows businesses to choose how they will be taxed. In a paper titled “Giving an ‘F’ to the Franchise Tax: The Texas Franchise Tax Fails to Fund,” Dr. Lori Taylor, an economist and director of the Mosbacher Institute at Texas A&M’s Bush School, and co-authors Erica Cottingham and Allison Shea, argue the tax should be abolished and replaced with a more efficient and equitable tax. Taylor spent 14 years as an economist and policy advisor in the Research Department of the Federal Reserve Bank of Dallas. The full text of their article can be viewed in “The Takeaway” at http://www.bush.tamu.edu/mosbacher/takeaway/2016/V7-1%20Franchise%20Tax%20Takeaway.pdf.